Aur to pick up 47% interest in Belmoral Mines

Aur Resources (TSE) has agreed to lend its considerable geological expertise and some financial help to Belmoral Mines (TSE) in return for the option to purchase a 47% stake in the company. The proposed agreement will allow Belmoral to refinance debts totalling about $8.6 million while giving Aur a much stronger foothold in the Val d’Or, Que., mining camp. The debt, which includes a $5-million loan from Central Capital Corp. of Toronto and $4 million lent by Aur, is to be repaid within the next two months.

By taking an initial 20% in Belmoral with an option to go up to 47%, Aur is picking up an indirect interest in some good exploration projects and two gold mines that were expected to produce 45,000 oz. last year.

Under a proposed agreement, Belmoral will issue to Aur 10.4 million common shares in consideration for a number of Aur shares equal to $6 million divided by the weighted average trading price of the shares for 20 days before the transaction is scheduled to close.

Aur has also agreed to subscribe for 3.2 million Belmoral shares at 60cents per share and an identical number of warrants, exercisable for two years at 60cents.

Pending the approval of regulatory authorities and both companies’ shareholders, Aur will gain control of the milling facilities it has been seeking to process ore from the Kierens zone mine and the neighboring Norlartic gold project. All of the 9,743 oz. gold produced from Kierens was processed by Belmoral under a custom milling agreement signed in 1989.

Last year, Aur failed to gain control of Societe Miniere Louvem’s (TSE) Chimo gold mine and mill near Val d’Or when a share purchase agreement was scuttled by Louvem directors and the Montreal Exchange.

More recently, Aur agreed to lend Belmoral $4 million to ease financial problems which arose after the latter company declared a $6.45- million writedown on investments.

Under the new agreement, Aur is extending the loan for two years and lending Belmoral an additional $5 million (including $4.5 million to pay down debt) for three years. The new loan will bear interest at an annual interest of 12%, payable monthly and can be converted into shares of Belmoral at 70cents each in the first two years and $1 per share in the third year.

If the deal closes April 30, Aur will provide technical and administrative services to Belmoral and nominate at least four executives to the 7-member Belmoral board. Belmoral Chairman Kenneth Dalton is expected to be succeeded by Aur President Jim Gill.

Aur says the new relationship will increase operational efficiencies at the mine sites, co-ordinate the further exploration of their extensive landholdings in the Val d’Or area and reduce overall administrative expenditures.